Using rail freight to reduce CO2 emissions

A year or two ago I set a hypothetical assignment for some of my students on a comparison of CO2 emissions on road freight versus rail freight. I based on the assumption that a CO2 charge would have to be paid by firms, and they could in fact save money by using rail freight. Of course the problem with rail freight is that is does not go door-to-door, but it might still be an option for transporting between cities or depots – depending on volume. At the time when I set the assignment, I did not find many examples (at least in the UK/Ireland), but I came across a Tesco press release in November last. According to the release, Tesco are expanding their use of rail services, which will mean 24,000 tons less CO2 and 72,000 less road journeys. Yes, this is a great thing for the environment, but the management accountant in me really wants to know the cost savings generated by this.

Alright, not as easy as I made it out above, since a few factors are missing. There is some data on the two new rail connections, and some on all four (two existing, two new) – we might be able to proxy the missing data, or just wait for the annual report 2012, where an effect should be visible and promoted.

Not sure if Tesco trade or need to trade in CO2 permits, but aside from CO2 “savings” which may or may not be costed, there will probably be a cost saving in real hard cash in terms of rail hauling more for less money. Yes, an estimate could be made of the costs saved, but it is complex